Club Convergence in Productivity among European Regions; Recent Evidence and Policy Implications

Georges Harb (), Charbel Assil () and Zouheir El Sahli ()
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Georges Harb: Department of EconomicsLebanese American University Lebano, Postal: Adnan Kassar School of Business; Department of Economics; Lebanese American University;, Lebanon
Charbel Assil: Department of Finance and Economics Qatar University Qatar, Postal: College of Business and Economics; Department of Finance and Economics; Qatar University;, Qatar
Zouheir El Sahli: School of Business and Law Frederick University Cyprus, Postal: School of Business and Law; Frederick University; Cyprus

Journal of Economic Integration, 2024, vol. 39, issue 3, 525-556

Abstract: We use data on 155 NUTS regions, with the objective of i) generating TFP series over 1996-2018, and ii) testing for club-convergence. We also employ a logistic regression to identify the significant club-membership conditioning factors. We contribute to the literature on two main grounds. Firstly, we are the first to extract TFP series while applying a methodology that allows for heterogeneous production functions and accounts for cross-section dependence and nonstationarity. Secondly, we are the first to apply a TFP-club convergence analysis in the context of European regions over a large period of time that witnessed several shocks affecting the European integration. Our analysis reveals that: (i) most of the regions of the top TFP convergence clubs are located in the "old" EU-member states, with few regions situated in countries that joined the EU after 2004; (ii) several regions in the South are trailing with the risk of falling in a "productivity trap"; (iii) regions situated in new EU-member countries registered remarkable TFP growth rates; (iv) larger regional research and development resources, and higher employment in high-technology sectors are associated with a greater probability of being member of top-ranked TFP convergence clubs. Our findings suggest that the needs of the lagging regions should be prioritized in the agenda of the EU. In this respect, we suggest several recommendations.

Keywords: NUTS regions; regional TFP; club-convergence; Cohesion Policy (search for similar items in EconPapers)
JEL-codes: O47 O52 (search for similar items in EconPapers)
Date: 2024
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